SIE Equity Securities 2

Question 1

Cumulative preferred stock means that if a dividend is missed, it must be:

Accepted Answer

Paid before any common dividends in the future

Answer

Cumulative preferred dividends that are skipped accumulate as arrears and must be paid before any common dividends.

Question 2

A rights offering allows existing shareholders to:

Accepted Answer

Purchase additional shares at a discount before new investors

Answer

A rights offering gives existing shareholders the privilege to buy new shares at a discount to maintain their ownership percentage.

Question 3

Which market is known as the secondary market for trading existing shares among investors?

Accepted Answer

Over-the-counter market

Answer

The over-the-counter (OTC) market is a secondary market where existing securities are traded between investors.

Question 4

Callable preferred stock allows the issuer to:

Accepted Answer

Redeem the shares at a specified price

Answer

Callable preferred stock can be redeemed (bought back) by the issuer at a predetermined call price.

Question 5

What is a warrant in the context of securities?

Accepted Answer

A long-term option to buy shares at a fixed price

Answer

A warrant is a long-term security giving the holder the right to purchase shares at a set price before expiration.

SIE - Securities Industry Essentials Practice Test